Results for 1Q-3Q of Fiscal 2023: Supplementary Materials

Third Quarter of Fiscal 2023

Supplementary Material

POLA ORBIS HOLDINGS INC.

Corporate Officer

PR, IR, CSR and Sustainability

Naotaka Hashi

• This report contains projections of performance and other projections based on information currently available and certain assumptions judged to be reasonable. Actual performance may differ materially from these projections resulting from changes in the economic environment and other risks and uncertainties.
• POLA ORBIS HOLDINGS INC. has applied Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. from fiscal 2022. The results for fiscal 2021 in this presentation have been calculated using the same accounting standards as those in fiscal 2022, and are shown as reference information (unaudited) for the purpose of comparison.

1. Highlights of Consolidated Performance
2. Segment Analysis
3. Forecasts for Fiscal 2023
4. Initiatives Going Forward & Appendices

1

Q3 Key Topics

Cosmetics Market

• The scale of the Japanese cosmetics market (including exports) was strong.
• In terms of domestic demand, economic activity progressed toward normalization and the recovery from the COVID-19 pandemic continued also in the cosmetics market.
• The recovery in inbound demand progressed due to an increase in the number of foreign tourists (consolidated inbound net sales for the first three quarters: up approx. 70% YoY, a revenue increase of approx. ¥0.9 billion).
• The cosmetics market in mainland China requires monitoring, with a sense of uncertainty concerning economic conditions and consumption trends.

Source: Ministry of Economy, Trade and Industry, Ministry of Internal Affairs and Communications, Japan Tourism Agency, Japan Department Stores Association, Intage SLI, and National Bureau of Statistics of China

Our Group

• Consolidated net sales increased both in Japan and overseas (up 6% YoY in Japan, up 6% YoY in overseas). Substantial increase in consolidated operating income (up 55% YoY).
• POLA's revenue and income increased in Japan, supported by growth in aesthetic treatment and B.A. Overseas revenue fell short of our expectations, despite a 10% increase, due to a slowdown in mainland China against partly caused by unanticipated changes in the market environment.
• ORBIS's progress exceeded expectations, with growth in number of customers and average purchase per customer resulting in a double-digit growth in revenue and substantial increase in income.
• Jurlique's revenue increased and losses were ameliorated in the third quarter (July to September).
• Losses from brands under development were ameliorated.

Medium-term Management

Plan Indicators (FY2023 Q3 YTD)

Overseas sales ratio	16.8%
(-0.6ppt*)
Domestic e-commerce	27.7%
sales ratio	(+0.8ppt*)
	*vs Dec. 2022

YoY Change in Consolidated Monthly Net Sales

(%)

20

10

0

-10

Jan.-Mar.

11.9%

Apr.-Jun.

6.4%

Jul.-Sep.

-0.0%

• Revenue in Japan is steady due to reopening.
• For overseas, sales activities in mainland China were triggered by the release of ALPS* treated water into the ocean, in addition to a sense of uncertainty regarding the economic outlook.

*Advanced Liquid Processing System

Month by month
Cumulative total	2

Consolidated P&L Changes Analysis

Net Sales to Operating Income

	FY2022	FY2023	YoY Change
(mil. yen)	Q3 Results (YTD)	Q3 Results (YTD)	Amount		%
Consolidated net sales	119,654	126,739	7,084		5.9%
Cost of sales	21,795	22,799	1,004		4.6%
Gross profit	97,859	103,939	6,080		6.2%
SG&A expenses	90,190	92,026	1,835		2.0%
Operating income	7,668	11,913	4,244		55.4%

	Key Factors
		Revenue increased both in Japan and overseas.
	■ Consol. net sales
	■ Cost of sales	The cost of sales ratio declined due to lower loss on valuation and
			abandonment of inventories.
			Cost of sales ratio FY2022 Q3 : 18.2% ⇒ FY2023 Q3 : 18.0%
	■ SG&A expenses	Labor expenses: up ¥132 mil. YoY
			Sales commissions: up ¥566 mil. YoY
			Sales related expenses: up ¥343 mil. YoY
			Administrative expenses, etc.: up ¥794 mil. YoY
	■ Operating income	Operating margin FY2022 Q3: 6.4% ⇒ FY2023 Q3: 9.4%

3

Consolidated P&L Changes Analysis

Operating Income to Profit Attributable to Owners of Parent

				FY2022	FY2023	YoY Change
	(mil. yen)	Q3 Results (YTD)	Q3 Results (YTD)	Amount	%
	Operating income	7,668	11,913	4,244	55.4%
		Non-operating income	4,903	3,159	(1,744)	(35.6%)
		Non-operating expenses	403	242	(160)	(39.8%)
	Ordinary income	12,169	14,830	2,660	21.9%
		Extraordinary income	-	376	376	-
		Extraordinary losses	827	1,389	561	67.9%
	Profit before income taxes	11,341	13,817	2,476	21.8%
		Income taxes etc.	(1,740)	4,476	6,217	-
		Profit attributable to non-	47	56	8	18.9%
		controlling interests
	Profit attributable to	13,035	9,284	(3,750)	(28.8%)
	owners of parent
		Key Factors

• Non-operatingincome: Decrease in foreign exchange gain (foreign exchange gain FY2022 Q3: ¥4,591 mil., FY2023 Q3: ¥2,777 mil.)

◼ Extraordinary losses:	Extraordinary losses due to discontinuation of Amplitude and ITRIM ¥785 mil.
◼ Income taxes etc.:	Reduction in income taxes etc. - recorded in the same period last year due to liquidation of H2O PLUS
	¥4,466 mil.

4

Factors Impacting Profit Attributable to Owners of Parent

Despite an increase in gross profit due to higher revenue, profit attributable to owners of parent declined by ¥3,750 mil. YoY due to a decrease in foreign exchange gain and the rebound of the reduction in income taxes, etc. in the same period last year.

(mil. yen)

20,000		286
18,000		132
	566	343
16,000		5,794
14,000		13,035
12,000

10,000

8,000

6,000

4,000

2,000

0

FY2022 Q3	Increase	Improved	Labor	Sales	Sales-
Profit	in gross	cost of	expenses commissions	related
attributable	profit	sales ratio			expenses
to owners
of parent

Positive impact

Negative impact

794	1,583
		184
		Impact of decrease in	6,226
		foreign exchange gain

9,284

Impact of dissolution

and liquidation of H2O PLUS in the same period last year

Admin.	Non-	Extraordinary Income	FY2023 Q3
expenses,	operating	income	taxes,	Profit
etc.	income	and loss	etc.	attributable
	and loss			to owners
				of parent

5

1. Highlights of Consolidated Performance
2. Segment Analysis
3. Forecasts for Fiscal 2023
4. Initiatives Going Forward & Appendices

6

Segment Results

			FY2022	FY2023	YoY Change
	(mil. yen)		Q3 Results (YTD)	Q3 Results (YTD)	Amount	%
	Consolidated net sales	119,654	126,739	7,084	5.9%
	Beauty care		116,231	123,260	7,029	6.0%
	Real estate		1,561	1,557	(3)	(0.2%)
	Others		1,861	1,920	59	3.2%
	Operating income		7,668	11,913	4,244	55.4%
	Beauty care		8,319	11,707	3,387	40.7%
	Real estate		430	420	(10)	(2.4%)
	Others		68	64	(4)	(5.8%)
	Reconciliations		(1,150)	(279)	871	-
	Segment Results Summary
	◼ Beauty care	Net sales increased YoY, primarily due to an increase in revenue from POLA and
		ORBIS, and operating income rose, mainly due to an increase in gross profit.

7

Beauty Care Business Results by Brands

(mil. yen)

Beauty care net sales

POLA

ORBIS

Jurlique

Brands under development

Beauty care operating income

POLA

ORBIS

Jurlique

Brands under development

FY2022	FY2023	YoY Change
Q3 Results (YTD)	Q3 Results (YTD)	Amount	%
116,231	123,260	7,029	6.0%
69,462	72,860	3,397	4.9%
28,109	31,227	3,117	11.1%
5,387	5,880	493	9.2%
12,040	12,601	561	4.7%
8,319	11,707	3,387	40.7%
8,568	9,286	717	8.4%
3,116	4,450	1,333	42.8%
(1,433)	(1,536)	(102)	-
(1,758)	(578)	1,180	-

Note: Consolidated operating income and loss for each brand are shown for reference purposes only (figures are unaudited).
Totals for the beauty care business include results for the H2O PLUS brand (completion of liquidation planned during 2023).	8

Brand Analysis (1)

Q3 Result (YTD)

• Revenue continued to grow substantially in the department store, e-commerce, and amenities business. New customer acquisition progressed and the number of new customers in Japan increased YoY.
• Revenue from consignment sales decreased, taking time to rebuild the customer base, despite an improving trend in the number of customers.
• Revenue in mainland China increased, but was affected by the release of treated water.

Q3 (YTD)		Results (mil. yen)	YoY Change
Net sales	72,860	4.9%
Operating income	9,286	8.4%
Key indicators
Sales ratio	Domestic	83.1%
		Consignment sales	62.5%
		E-commerce	6.5%
		Dept. store, B2B(1) etc.	14.1%
	Overseas	16.9%
Sales growth(2)	Domestic	up 3.8%
		Consignment sales	down 2.1%
		E-commerce	up 20.3%
		Dept. store, B2B etc.	up 30.3%
	Overseas	up 10.4%
Consignment sales channel	up 8.1% /
Purchase per customer(2)/ # of customers(2)	down 8.0%
# of stores domestic(3)			2,727 (down 107)
# of stores overseas(3)/			158 (up 6) /
# of stores mainland China(3)	89 (up 2)

Topics

• Opened the second domestic store in a department store in South Korea, aiming to boost POLA's presence in
  Asia (August)

Image for illustration purposes

Quarterly net sales (mil. yen)

30,000			26,545	24,183		26,522	25,579		24,757
						23,826		24,406
				21,229				23,097
20,000
10,000
0			2021 2022 2023		2021 2022 2023		2021 2022 2023
					1Q				2Q	3Q
				Quarterly operating income (mil. yen)
6,000			3,909				4,262	3,511
4,000			3,501					3,670
					3,286
									2,876
											2,273
2,000			1,611
0
	2021 2022 2023		2021 2022 2023		2021 2022 2023
					1Q				2Q	3Q
(1) Hotel amenities business	Note: Results for FY2021 have been calculated using the same	9
(2) YoY basis	(3) vs Dec. 2022				revenue recognition standards as FY2022.